Double Taxation Agreement UK / Germany - How much to who?

[JonJ]

I've been scouring the HMRC website today trying to find specific details, but haven't found what I need yet.

I am hoping that someone may be able to answer the following.

I am a German resident (since 2003), looking to take a single 2-3 month contract in the UK. I will probably use an umbrella company for this. I (now) know that I am liable to pay UK income tax, but that as there is a Double Taxation agreement with Germany that I can either claim a rebate from the UK, or not be liable for paying a percentage of those UK earnings in Germany (I'm not sure yet what is true).

Can someone help explain what actually happens?

Many thanks
Jon.

[BlasterBates]

Not a problem, in an Umbrella co. you are an employee. As such you'll be taxed in the UK.

You then declare this on your German tax form and it won't be taxed again. I have done this, had UK income and declared it on a German tax form and it wasn't taxed in Germany. It was however used to calculate tax on interest payments, from my investments in Germany. They don't use credits, i.e. if you pay 25% tax and the Germans want 35% they tax you an additional 10%, on employment income, you pay no tax at all in Germany, but of course it is used to calculate tax rates on other income. So if you then work again in Germany they'll put you on a higher tax rate. So for example lets say you earnt 5 grand in the UK they might not charge you any tax in the UK because it is below the threshold and neither would they in Germany, but it would count towards your tax free allowance in Germany, i.e. the amount you can earn before you start paying tax.

However if the UK tax authorities agree not take any tax because you're not tax resident, then it would be taxed in Germany. I doubt though that this would be the case.

[JonJ]

Thank you BlasterBates.

Sounds pretty straight forward. Think its time to include the UK in my contract searches.